Tuesday, August 03, 2010

Raghuram Rajan on Indian billionaires

Raghuram Rajan, a finance professor at UChicago's Booth School of Business and an economic adviser to the Prime Minister of India, gave a talk here at IISc last Sunday on "Faultines: India in the World Economy." The talk turned out to be largely a summary of his new book, Fault Lines: How Hidden Fractures Still Threaten the World Economy, with "India in the World Economy" getting only a cursory discussion in the final 10 minutes, thrown in almost as an afterthought.

In those final ten minutes, Rajan touched on too many different things -- a quip here about NREGA, and a comment there about higher ed system, a snide remark here about quacks cheating poor, rural patients, and a quick comparison there about how India and China manage their economies. It was all too quick, all too cursory, and all over the place. [I noticed that the talk was videotaped; I couldn't find it on the web so far].

I don't know about the rest of the audience, but I went in there expecting a coherent thesis on India's place in the World economy; what I felt we got was a coconut-tree-and-cow story.

Anyways, Rajan made an interesting point about India's (dollar) billionaires (which he elaborated a bit on during the Q&A). I don't have to paraphrase what he said, because he has said this stuff in a recent ToI interview:

... Rajan said he had no problems with wealth creation, "but I do think there is a problem if much of this wealth comes from proximity to government". Pointing out that India had the second largest number of billionaires per trillion dollars of GDP in the world (after Russia) prior to the crisis, and now possibly the largest, Rajan said "If you look at the areas where we have so many billionaires, many of them are not software entrepreneurs, it's things like land, real estate, natural resources and areas that require licences."

While conceding that some of these people have genuinely created entrepreneurial firms that have done wonderful things, in telecom for instance, Rajan added, "There are other areas which are less competitive and where proximity to government helps. That's a worrisome factor."

1 Comments:

"Many of [the billionaires] are not software entrepreneurs"---why should we be happier if a software entrepreneur makes the big bucks as compared to others? As a class, software entrepreneurs are left in the dust by heart surgeons and oncosurgeons, and for very good reason!